On Wednesday evening, the Senate passed by voice vote a House-passed Paycheck Protection Program (PPP) reform bill. This brings Congress one step closer to enactment of the Paycheck Protection Program Flexibility Act, which will give small businesses owners more flexibility in using PPP loan money.
The PPP was enacted in order to help small businesses with an emergency loan as a result of the COVID-19 pandemic. Last week, the reform bill passed the House of Representatives; now approved by the Senate, the bill goes to President Donald Trump for his signature.
If signed by the President, the Payment Protection Program Flexibility Act will do the following:
- Bychanging the 75/25 rule to 60/40 to qualify for loan forgiveness, small businesses will have more flexibility in spending. The 75/25 rule originally required loan recipients to use three-quarters of the loan money for payroll and no more than 25% of the money for all other costs, such as rent and operating costs, in order to be forgiven.
- The “covered period” will be extended from eight weeks to 24 weeks, or until December 31, 2020. This covered period means recipients have more time to use funds received under the PPP.
- Limits on loan forgiveness for small businesses will be removed for businesses that were unable to rehire employees, hire new employees, or return to the same level of business activity before the pandemic.
- Small businesses who take a PPP loan and will also be able to qualify for a separate, recently enacted tax credit to defer payroll taxes.
- Small business will receive additional time to rehire employees or to obtain forgiveness for the PPP loan if social-distancing guidelines and health-related actions from the Centers for Disease Control and Prevention or other agencies have prevented the business from operating at the same capacity as it did before March 1, 2020.
- It will also extend the period for when businesses can apply for loan forgiveness from within six months to within 10 months of the last day of the covered period before the business will have to pay on interest and principal.
- Lastly, under the Payment Protection Program Flexibility Act, loan interest and payments of principal fees will be deferred until the loan is forgiven.
In a quote, Senate Minority Lead Chuck Schumer stated, “We can’t wait any longer. Businesses are really suffering for lack of these changes…We must get this done. Businesses are going under every day.”
Questions about the Changes to the Small Business PPP Loan Program?
If you are business owner and have any questions about these changes, we are help to help. Call us with any questions and to see how these changes may benefit you.